1. Field of the Invention
The present invention relates to an automatic trading system with computer aided decision-methods of when to buy and sell on stock exchanges for use in connection with deciding when to buy and sell a trading product.
2. Description of the Prior Art
The decision of when to buy and sell is an essential issue when trading on stock exchanges.
Still the decision of when to buy and sell stocks, futures, options, bonds warrants, currencies and similar traded products on stock exchanges, hereinafter called a “Symbol”, using automatic trading systems, and charting systems with limited or no functionality of automated trading, hereinafter called a “ATS”, is mainly based on the traders interpretation of a visual presentation of a Symbols price movements using bars and technical indicators, often combined with fundamental information and market news. For the technical analysis of a Symbol, the patterns of the bars together with the patterns of the technical indicators, are the fundamental sources and inputs for the decision making of when to buy and sell. The time when a bar is closed/ended, determines the visual presentation of the bar, its significance and value in combination with the former bars, but also determines the following calculation of the technical indicators. The methods of deciding when a bar should be ended/terminated has till today been divided into two main methods with the resulting two bar types; timebars and rangebars (including volumebars). Both bar types have advantages and disadvantages. Timebars with the disadvantage that fast price movements are not cached till after the fixed time-period of the bar has terminated, which moment often will be too late to react. Rangebars, including both price and volume rangebars, with the disadvantage that horizontal price/volume movements are not captured, thus sideways trading or important support or resistance levels may not be detected by this bar type. Especially automatic trading systems are vulnerable to the disadvantages of timebars and rangebars, as an automatic trading system primarily acts at the close of a new bar, used in calculating of the technical indicators, used as input to the Personal Indicator which decides whether to buy or sell.
The trader's ability to select the optimal bar configuration, the timeframe, the optimal set of indicators, and the optimal settings for each indicator, and finally his interpretation of the behavior of this mix of inputs, determines his success in trading Symbols on the stock exchanges. An ATS may have one or more functionalities which decides or suggests when to buy and sell. One type of decision may be by combining a mix of available criteria into—a Personal Algorithm, which the ATS can use as input for when to buy and sell. Probably the most simple criteria may be if a Symbols price exceeds a fixed price, this criteria has been used in decades by trading systems for STOP LOSS automatically closing a position, very visible on stock market when thousands of systems hits a specific price or price area, and when ATS automatically closes the position. Most commonly such criteria are written by using a programming language and included in the ATS. Various ATS systems have tried to provide the user with a form of GUI in the process of developing and combining such a mix of criteria into an algorithm. However they all involve programming or simple dropdown lists of strategies or criteria, these methods are weak with the respect to, that a useful OR functionality is difficult to obtain, and multi timeframe or multi symbol algorithms are difficult to develop. A set of criteria for both buying and selling doubles the amount of criteria visible to the user. Using a programming language in the development of algorithms and strategies requires that the user has programming skills. Further the need of validating, compiling and debugging the code written, slows down the development process significantly. In case of more than one Symbol, chart or time frames are used in the combining of a mix of criteria, this task is even more difficult and complex to perform. In the process of combining a set of criteria into a Personal Indicator, the back testing of this Personal Indicator on historical data, and finally testing this Personal Indicator on a Paper Account, the user may have to back test 1,000's of combinations till he finally finds a combination which is profitable. If all combinations have to be programmed, debugged and compiled, this process may exceed the time available for the developer to spend in the effort to develop and test algorithms and strategies. Many users of present ATS systems lose interest and patience after a few hours or days of process. The missing availability of a method to develop and combine a Personal Indicator fast yet complex, by using acid a non-programming method, limits the use of ATS systems to traders with programming skills, often limits the algorithms to simple algorithms, and requires an effort time-wise that few developers can spare. Further, in today's market influenced by automated trading, the way the market behavior changes with an increasing speed, traditional development methods will be too slow to follow the changes in the market behavior. Further, the increasing competition from ATS systems requires more sophisticated and complex algorithms in order to compete, thus the traditional programming of algorithms may be too slow and simple to compete in the future market. Trading on the stock market is not an easy task, especially if the trader has to follow the market tick by tick 8 hours a day. During the latest years, new tools such as automatic and semi automatic trading systems have entered the market in order to help the trader in following the market during the day, or even run unattended using a Personal Indicator as decision of when to buy and sell. Less experienced traders consult Mentor Rooms, where experienced traders follow the market during the day, advising the subscribing traders of when to buy and sell. Usually this is performed in a chat forum where the calls are written or/and announced orally, or in some cases also visually presented on charts in the Mentor Room. The trader then manually enters the order on his trading platform upon trading calls from the Mentor Room.
This service demands that the trader follows the Mentor, listen, read and understand all the messages in order to execute the suggested trades correctly. This may cause misunderstandings by the user, missing important trades or even executing wrong trades or mistyping the order. Once a trade has been opened, the trader is forced to stay at the computer to follow the trade, and may be too impatient exiting a trade too early, or may be greedy exiting the trade too late.